Employee Owned Businesses the New Future Model for US Business?

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This was originally written in December 2008.  It’s still worth a read and some consideration as a company business strategy.

Employee Owned Companies

In my career, I’ve worked for two employee-owned companies. Both were excellent employers.

Being employed by a company  you own a stake in makes a huge difference in the company culture. My mantra for 2009 is that company culture is ultimately the one reason that drives a business to excellence, superseding talent, compensation, visions, missions, innovation and any other reason you may throw out. Without a strong vibrant encouraging culture, none of these other factors can flourish.

Employee ownership is the single strongest differentiators in business, and is sorely under-utilized. I am not talking about employee stock purchase plans. I am talking about actually owning shares that you receive as part of your annual compensation.

This would do far more to help rebuild economies than a piece of adversarial legislation like the Employee Free Choice Act ever could. Business and employees don’t need 3rd party interveners and relationships based on adversarial negotiation. They are mutually engaged in seeking the best outcome for business success, in a way that serves the interest of all stakeholders.

Employee Stock Ownership Plans are one way of achieving this. I saw a really great story about such an example of this in a story from the Naples New this weekend.

In their own hands: Employees run the business at Florida Company

In a rare move to save his company, a dying man initiated a complex process
to put his 30-year venture into his employees’ hands.

Larry Bill had battled cancer for years and needed to address Pelican
Wire Co.’s future without himself at the helm.

There were potential buyers, including a Chinese company, said Ted
Bill, his son and company president.

Instead, the Bill family embarked on a nearly nine-month process of
transferring ownership to Pelican’s 48 employees in an employee stock ownership
plan, or ESOP, which Ted Bill referred to as expensive, although no figures were
disclosed.

The transaction was completed this fall, about six months after Larry
Bill died.

“He always had a passion for the employees,” Ted Bill said. “He wanted
them to come to work feeling like they had an ownership stake.

Employee Owned Businesses the New Future Model for US Business?

Work looks different when you’re an owner

Worker owned companies are better

Over the course of my career I’ve been privileged to work at some excellent companies. Three of them, Texas Instruments, Andersen Windows, and my current employer Publix all had plans that allowed the employees to own an interest in the company via stock or an ESOT or profit-sharing. These companies shared some common elements.

They were profitable, and high performing. The employees were committed and engaged. The cultures were viewed as enviable. The ownership aspect may not have been the only driver of this success, but it is certainly a major contributor.

When you are an employee AND an owner, it makes the workplace look different. I can attest personally, it makes you think differently about how you treat company resources.

Skin in the game makes you a better player for the team.

I was reminded of this when I saw this headline from the LaCrosse Tribune, Badger Corrugating hands over 40 percent ownership to workers.

Check out why the owner gave nearly half the family to his employees:

ESOPs are an increasingly common tool used by businesses to spur growth, save on taxes and get workers more involved in decision-making, said Mary Jo Werner, a CPA and partner with Wipfli in La Crosse.

The plans serve as an option for retirement savings, giving employees a nest egg to hold and sell when they leave the company. Nearly 10.3 million workers in the United States share ownership in their company through an ESOP, including employees at the La Crosse-based grocer Festival Foods.

A percentage of a business’ profits are not taxed with an ESOP, equal to the percentage of the company owned by workers. Tax savings are reinvested into the company.

Ownership can change a worker’s feelings about the fate of the company, engaging them and inspiring teamwork. That kind of attitude adjustment is another potential boon for ESOP businesses, Werner said.

“If you have a stake in the outcome, if you’re an owner in something, you’ll work a little harder,” Werner said. “Be a little more mindful of what opportunities there are for the company.”

Sounds like pretty good advice. Maybe more companies should look at this strategy in the future. There are plenty of great companies to benchmark against. check out this list of great employers from the National Center for Employee Ownership.